Iraqi government scraps wireless auction plans, reaches deal with current operators

Iraq has scrapped its long-delayed cellular auction and instead decided to license the three national mobile phone carriers in June under an arrangement calling for revenue-sharing and an upfront cash payment of at least $250 million from each operator, according to Iraqi government and industry sources.
The decision removes a cloud of uncertainty over Iraqi national carriers, GSM wireless vendors and investors on arguably the most successful reconstruction effort since the U.S.-led invasion to overthrow Saddam Hussein began in March 2003. Iraq, with effectively no cellular market under Saddam’s iron-fisted regime, now has nearly 10 million mobile phone subscribers. In addition to the three national cellular carriers, there are two smaller mobile phone operators in Iraq.
The Iraqi government action is not welcome news for U.S.-based Qualcomm Inc., the global CDMA leader, which has tried to make inroads in the GSM-dominated Middle East. However, Iraqi wireless local loop licenses will be based on CDMA.
Iraqi Prime Minister Nouri al-Maliki, reacting to complaints over licensing uncertainty from Orascom Telecom Iraq Corp., Asia Cell Telecommunications Co. Ltd. and Atheer Telecom Iraq Ltd., created a committee to address the matter. The panel, which included Iraqi ministers of communications, finance, technology and national security and National Communications and Media Commission head Siyamend Zaid Othman, met with wireless executives three weeks ago. The outcome was an agreement in principle that the three national mobile phone operators each would receive a 15-year license, with automatic renewals every five years thereafter. In exchange, Orascom, Asia Cell and Atheer agreed to make a cash payment of at least $250 million and share 18 percent of annual gross revenues with the Iraqi government. In addition, the ownership of the three national mobile phone carriers must be significantly Iraqi.
Orascom, Asia Cell and Atheer have been in limbo since late 2005 when their two-year regional/national permits issued from the now-defunct Coalition Provisional Authority expired. After that, the Iraqi government extended licenses for six months and then every three months as the National Communications and Media Commission pursued an auction of up to four national cellular licenses. The carriers have invested hundreds of millions of dollars in mobile phone deployment, but have had to hold back on contracts and expansion generally because of the limbo in cellular licensing. A power struggle ensued between independent telecom-media regulator CMC and Iraqi’s Ministry of Communications, with the latter gaining the upper hand ultimately.
GSM infrastructure vendors serving the three national mobile phone carriers include Motorola Inc., Alcatel-Lucent, Huawei and Nokia-Siemens. Motorola, Nokia Corp., Sony-Ericsson and others supply GSM handsets to the carriers.